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US seeks $864m from Bank of America after mortgage fraud verdict

Government has urged bank pay damages after a federal jury found it liable for fraud over defective mortgages sold.

The US government has urged that Bank of America Corp pay $863.6m in damages after a federal jury found it liable for fraud over defective mortgages sold by its Countrywide unit. In a filing late Friday in the US district court in Manhattan, the government also asked for penalties against Rebecca Mairone, a former midlevel executive at the bank's Countrywide unit who the jury also found liable, "commensurate with her ability to pay".

The government said the penalties were necessary to punish the bank and Mairone "and to send a clear and unambiguous message that mortgage fraud for profit will not be tolerated".

Bank of America and Mairone were each found liable for defrauding government-controlled mortgage companies Fannie Mae and Freddie Mac through the sale of shoddy loans purchased from Countrywide in 2007 and 2008. The case centered on a mortgage lending process at Countrywide, which Bank of America bought in July 2008, known as the "High Speed Swim Lane," or alternatively "HSSL" or "Hustle".

The government said Countrywide's program emphasized and rewarded employees for the quantity rather than the quality of loans produced, and eliminated checkpoints designed to ensure that loans were sound.
The penalties the government requested are slightly higher than the amount lawyers in the office of Manhattan US Attorney Preet Bharara had previously indicated they would seek, $848.2 million. The amount is based on the gross loss Fannie Mae and Freddie Mac incurred on the HSSL loans, the government said.
Bank of America, the second-largest US bank, has previously said it is evaluating its options for appeal. It is scheduled to respond to the government's penalty request by 20 November.
"We believe the filing overstates the volume of loans and the appropriate measure of damages arising from one narrow Countrywide program that lasted several months and ended before Bank of America acquired the company," Lawrence Grayson, a spokesman for the bank, said Saturday.

In its filing, the government did not said it was holding off on recommending an amount to penalize Mairone until after it analyzed a financial disclosure form she provided Friday. The government also raised the question of whether Bank of America may indemnify her for the penalty. Mairone joined JP Morgan Chase & Co after leaving the bank. Her lawyer did not immediately respond to a request for comment Saturday.
Penalties will be assessed by US district judge Jed Rakoff, who presided over the four-week trial in Manhattan. The 23 October verdict was a major victory for the US Department of Justice, which along with other regulators has been criticized by investors, politicians and others for failing to hold banks and individuals accountable for their roles in events leading up to the 2008 financial crisis.
Bank of America paid $2.5bn for Countrywide, but analysts have said that acquisition has since cost the Charlotte, North Carolina-based bank tens of billions of dollars for litigation, loan repurchases and write-downs.
In October, Bank of America disclosed that staff of an unspecified US attorney's office plan to recommend that the Justice Department file a civil action against the bank related to the securitization of mortgages. And in August, the government filed two civil lawsuits in North Carolina accusing the bank of understating the risks of about $850m of mortgage securities. The bank moved to dismiss those case Friday.
The Hustle case, like some other financial crisis cases recently pursued by the government, was brought under the Financial Institutions Reform, Recovery, and Enforcement Act, a law passed after the 1980s savings-and-loan scandals. That law carries a lower burden of proof than criminal cases, and a 10-year statute of limitations in which to bring cases, twice as long as in typical securities fraud cases.

At least they are going after some of the crooks, but probably only the ones that did not donate enough money to Democrats. That is why the Clinton administration went after Microsoft. Microsoft now donates millions to both parties. Everyone wants to get their hands into deep pockets.

"Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote." -- Benjamin Franklin

At least they are going after some of the crooks, but probably only the ones that did not donate enough money to Democrats. That is why the Clinton administration went after Microsoft. Microsoft now donates millions to both parties. Everyone wants to get their hands into deep pockets.

We always hear about the huge fines, but we never know what they are doing with them. Are they using this money to help homeowners, or to hire more regulators or it just goes into the gov pockets?

Those who can make you believe absurdities can make you commit atrocities.

We always hear about the huge fines, but we never know what they are doing with them. Are they using this money to help homeowners, or to hire more regulators or it just goes into the gov pockets?

I think they are doing it to offset the fiscal deficits so they can fraudulently claim that they have reduced spending. The problem is that will a grossly bloated Federal budget, billions of dollars in collected fines has little effect.

"Democracy is two wolves and a lamb voting on what to have for lunch. Liberty is a well-armed lamb contesting the vote." -- Benjamin Franklin